Gold prices near $4,500/oz record high on rate cut bets, US tariff uncertainty
Introduction & Market Context
NorAm Drilling AS (NORAM) presented its second quarter 2025 results on August 26, showing a slight decline in key performance metrics amid challenging market conditions in the Permian Basin. The company reported revenue of $24.9 million, down from $25.8 million in the previous quarter, reflecting broader industry trends of declining rig counts and well completions in its core operating region.
The presentation highlighted significant market headwinds, including a substantial reduction in Permian Basin activity, with rig counts down approximately 50 rigs year-to-date and 100 rigs since 2023. This decline is visualized in the company’s market analysis, which shows a clear downward trajectory in both rig counts and well completions.
As shown in the following chart of Permian Basin activity trends:
Despite these challenges, NorAm’s stock price has shown resilience, closing at 26.9 NOK on the presentation date, representing a 0.93% increase. The company continues to trade well above its 52-week low of 21.8 NOK, though still significantly below its 52-week high of 39.7 NOK.
Quarterly Performance Highlights
NorAm Drilling’s Q2 2025 results revealed a modest decline across key performance metrics compared to the previous quarter. The company achieved a utilization rate of 86.0%, down from 89.7% in Q1, while adjusted EBITDA decreased to $5.3 million from $6.7 million. Despite these challenges, the company maintained profitability with a net profit of $3.7 million and earnings per share of $0.08.
The following slide summarizes the key financial highlights for the quarter:
The company’s operational metrics show a direct margin per day of $9,602 and net cash flow margin per day of $6,830 for Q2 2025. Management noted that Q2 direct margin was impacted by the stacking of a second rig and higher repair and maintenance costs, which were attributed to necessary repairs and recertifications during the period.
The detailed operational and financial data is presented in this comprehensive table:
Detailed Financial Analysis
NorAm Drilling maintained a strong balance sheet in Q2 2025, with total assets of $77.4 million and total equity of $60.6 million. The company reported total liabilities of $11.6 million, maintaining its debt-free status which has been a cornerstone of its financial strategy.
Cash flow from operational activities was $1.1 million for the quarter, while cash flow from financing activities was negative $5.3 million, primarily due to dividend payments. The company noted that cash decreased by approximately $4 million due to working capital reversals and Norwegian tax payments.
The company’s balance sheet and cash flow statement provide a detailed view of its financial position:
A key highlight of NorAm’s financial strategy continues to be its commitment to shareholder returns. The company has maintained 33 consecutive monthly cash distributions totaling $82.2 million, or approximately NOK 20.05 per share. The latest distribution of $0.03 per share implies an annualized dividend yield of 13.5%, making it an attractive option for income-focused investors despite the operational challenges.
Strategic Initiatives
NorAm Drilling continues to leverage its fleet of 11 modernized Ultra Super Spec rigs, with 9 out of 11 currently contracted. Management indicated they are actively pursuing opportunities for the two idle rigs, including potential deployment outside of the Permian Basin, which would mark a strategic shift from their historical 100% Permian focus.
The company’s strategic positioning is illustrated in this comprehensive overview:
NorAm maintains a high-quality customer portfolio including major operators such as ConocoPhillips, FireBird Energy LLC, OXY, Double Eagle, and Permian Resources. This diverse client base provides some insulation against individual customer risk, though not against broader market trends affecting the entire Permian region.
The company’s strategic advantages include its state-of-the-art walking systems and racking capacity, which have enabled it to drill some of the longest wells in the Permian. Additionally, its lean management team, skilled labor force, and low employee turnover contribute to maintaining a low-cost break-even point, which is crucial in the current challenging market environment.
Forward-Looking Statements
Looking ahead, NorAm Drilling provided a cautious but strategically optimistic outlook. Management acknowledged near-term uncertainties associated with potential US tariffs and OPEC+ decisions, while noting the continued focus of exploration and production companies on operational and capital discipline.
Current WTI prices suggest flat to slightly declining activity levels in the Permian Basin, according to the company’s assessment. However, management expressed longer-term optimism for Super Spec rigs based on the expectation that US shale production is likely peaking, which could eventually lead to increased demand for high-specification drilling equipment.
The company intends to continue its policy of paying out excess earnings to shareholders while maintaining operational flexibility. This balanced approach to capital allocation reflects management’s commitment to shareholder returns while preserving the financial strength needed to navigate market volatility.
The recent events and outlook summary provides additional context for investors:
NorAm Drilling’s Q2 2025 results reflect the challenges facing the Permian Basin drilling sector, with declining rig counts and production growth. Despite these headwinds, the company’s debt-free balance sheet, continued profitability, and commitment to dividend payments position it to weather the current market conditions while maintaining shareholder returns.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.